Commentary

First Take

Mumbai slides on debt fears

Commentary: But contrast with U.S. is striking

LONDON (MarketWatch) -- Markets in Mumbai crumpled Monday, clobbered by a new plan to boost government borrowing to a record 4.51 trillion rupees, or the high single digits of GDP.

For a sense of perspective, the projected Indian deficit is equivalent to $93 billion, or about 10% of the projected U.S. budget deficit this year. This is in a country with nearly four times as many people as the U.S. See related story.

Put another way, India's projected budget gap is roughly four times as big as California's, even though its population is nearly 40 times as big as the Golden State's.

On the plus side for the U.S., there's still enough faith -- perhaps too much -- in the economy's ability to recover, and the government's ability to service the debt it keeps accumulating. Even California is getting away with issuing IOUs as its leaders disgrace themselves by refusing to make difficult decisions and act like grownups instead of movie stars.

But longer term prospects for the two economies, and those who would invest in them, are starting to lean in favor of India. Among other things, India's planned expansion of its debt got a swift market rebuke, suggesting that markets there are still independent and freewheeling.

And residents can be at least be thankful that their markets are able to register a protest over government policies likely to retard what remains one of the world's last, best growth stories.

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